Oil falls $3 as China to raise fuel prices

By Margaret Orgill

LONDON (Reuters) - Oil fell $3 to $133 a barrel on Thursday on news that China will raise retail gasoline and diesel prices for the first time in 8 months, which will curb demand in the world's second largest energy consumer.

Soaring energy use in China has been one of the main factors driving oil prices to a record near $140.

"This is very significant, a watershed move which suggests the Chinese government is prepared to risk unpopularity to curb the growth in domestic fuel demand," said John Kemp, an economist at RBS Sempra.

"We've already seen other Asian economies cut subsidies and the big one to hold out, until now, was China."

The move comes just days before an emergency meeting on Sunday in Saudi Arabia between consumers and producers to discuss soaring oil prices.

U.S. crude fell $3 to $133.68 a barrel before firming a touch to stand $2.50 lower at $134.18 at 3:14 p.m.

London's Brent crude was $2.42 lower at $134.02.

China is to raise retail fuel prices by 1,000 yuan ($145.50) a tonne from Friday to help recoup losses in the face of record crude prices, industry sources told Reuters.